Oil giants propose limiting EPA on fracturing

Oil giants propose limiting federal oversight of fracturing

TOM FOWLER, Copyright 2010 Houston Chronicle |
March 25, 2010

BP, ConocoPhillips and Shell Oil Co. have provided Senate lawmakers with language to include in a pending climate change bill that essentially would block federal oversight of hydraulic fracturing, a technology that's key to the current natural gas drilling boom.

The companies prepared the document, according to sources familiar with it, at the request of the Senate team that is drafting climate change law, which includes Sens. John Kerry, D-Mass., Lindsey Graham, R-S.C., and Joseph Lieberman, I-Conn.

If incorporated into the climate change law, it would keep the Environmental Protection Agency from imposing regulations on fracturing, which is now regulated at the state level.

The document recommends that states adopt standards for disclosing the contents of hydraulic fracturing chemicals “to health professionals or state agencies” in order to protect health or environmental safety but maintain “the confidentiality of trade secret information” in the fluids.

It also encourages states to evaluate drilling practices to see if they comply with new American Petroleum Institute standards for well construction and integrity.

Hydraulic fracturing involves drilling into a formation and injecting water mixed with sand and chemicals under high pressure. The mixture cracks open the shale while the sand holds open the fractures, allowing the natural gas to flow more freely to the surface.

Some environmentalists have raised concerns about the enormous amounts of water used in the process, and about possible chemical contamination of water supplies near fracturing sites.

Legally nonbinding

A copy of the proposal the Houston Chronicle received is labeled “Sense of the Senate Language,” meaning it would be legally nonbinding. Rather, it is intended to give guidance to regulators regarding the true intent of a congressional action absent explicit mandates.

Officials with the three companies declined to comment on their involvement with the bill, but BP spokesman Scott Dean said his company believes hydraulic fracturing has a safe track record.

“We support disclosure of the contents of fracking fluids and are confident that the states can come up with disclosure rules that answer everyone's needs,” Dean said.

The Senate's request for input from BP, ConocoPhillips and Shell may bode well for natural gas industry interests. The House version of a climate change bill passed last spring was widely seen as favorable to the coal mining and power industry while giving no support to the domestic natural gas industry.

In part because of that, BP and ConocoPhillips in February withdrew from the U.S. Climate Action Partnership, an alliance of businesses and environmental groups that has pushed legislation aimed at reducing greenhouse gas emissions believed to contribute to climate change.

At the time BP and ConocoPhillips officials said they would be better positioned to shape climate legislation independently than through the partnership. For example, BP and ConocoPhillips have persuaded the Senate to consider a carbon fee on jet and automotive fuels in its climate change bill as an alternative to the cap-and-trade system included in the House bill.

Cap and trade would place limits on carbon emissions and create a market for purchase and sale of emissions permits.

But the Senate's request for industry input on hydraulic fracturing doesn't mean industry's language limiting EPA oversight will make it into the climate bill. Senate staffers have drafted their own version that pushes for more federal involvement.

That text refers to fracturing as “a critical process,” but it says federal and state governments “should partner to ensure that hydraulic fracturing is done in a safe and responsible manner” without duplicating efforts.

The federal government would ensure states have the regulatory capacity to manage increased shale gas development and could provide block grant funding to assist with environmental regulatory staffing and monitoring.

Other parts of the document involve making disclosure of fracturing fluids more public; developing water recycling efforts; and encouraging the use of high standards for well bore casing techniques.

Reduced chances

Roger Read, a senior energy analyst with Natixis Bleichroeder in Houston, said the Democrats' loss of a super-majority in the Senate likely lowered the chances of legislation to impose tougher federal oversight of fracturing. But most states were already moving toward more regulation of surface water and fluid pits that are “likely a bigger source of contamination than frac fluids.”

“Anything that keeps the EPA from adding substantial paperwork, fees, roadblocks to frac fluids and reservoir stimulation is a positive in our opinion,” he said.